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How Do I Know if My Project is Located in a TEA?

How Do I Know if My Project is Located in a TEA?

The concept of a Targeted Employment Area or TEA was developed along with theEB-5 visa program in 1990 to assist on the economic development of remote or economically adverse areas, or both.

The Code of Federal Regulations, Title 8 Article 204.6 (e), defines a TEA as an area which, at the time of investment, is a rural area or an area which has experienced unemployment of at least 150 percent of the national average rate. A rural area is defined by the same article, as an area not within a metropolitan statistical area as designated by the Office of Management and Budget, or the outer boundary of any city or town having a population of 20,000 or more.

Challenges observed by EB-5 practitioners, attorneys, and consultants when it comes to claiming that a business will be in a TEA:

There is no federal standard, other than the clearly defined law above, on what unemployment data to use.

There is no clear process for submitting proof of evidence that the area is in fact a TEA EB-5

There is no federal agency that issues TEA designation, and therefore this designation, if available, occurs at the state level with different government agencies taking the lead on a state by state basis.

Unemployment levels are measured by the Bureau of Labor Statistics (BLS) of the U.S. Department of Labor on a monthly basis using the Current Population Survey (CPS) with a sample size of 60,000 households. This is roughly 110,000 individuals scattered across the U.S. The Census Bureau then splits the country into 2,025 geographical areas and select 824 of these to represent every state. BLS performs surveys monthly within this sample. This technique provides a fairly accurate view of the unemployment level in the U.S. at an average level, but it is clear that fluctuations city by city and county by county are not well observed.

Because of this, the Census Bureau also performs the American Community Survey (ACS). This survey is the largest household survey in the U.S. and arguably the most accurate when released but also the most time consuming. This survey is updated yearly for larger cities, every three for smaller cities, and every five for areas in which population is below 20,000.

The USCIS is aware of the differences on data accuracy, update periods, and assumptions behind each measure. Because of this, it is accepted that when evaluating the threshold for TEA of 150% national average, practitioners may use the last year national average rather than using the monthly U.S. unemployment rate.

As of June of 2014 the threshold based on the national average of 2013 was 11.1%. When determining the actual unemployment rate at the local level, the applicant may use the ACS data which provides statistics on the more than 74,000 tracts, the smallest geographical area tracked by the U.S. census, and updated every 1-3 years for non-rural areas. Let’s recall that TEAs already include all rural areas regardless of unemployment levels.

Geographical Alignment of Tract Employment Statistics (GATES)

If you find that your business is located in a tract in which the unemployment rate is not above the 150 percent threshold, you may perform what we call a Geographical Alignment of Tract Employment Statistics (GATES) study, also commonly known as gerrymandering. By doing this, you may group statistics of adjacent tracts to qualify the region where the business will be established. This is a technique specifically approved by the USCIS on the basis of fairness.

Tracts tend to be rather small areas and it is quite unrealistic to think that all employees will reside in the same tract as the business. While GATES studies are allowed by the USCIS to seek TEA designation, they are approved by the state on a case by case basis. Projects that group a large number of tracts, or use unrealistic assumptions to qualify for the TEA designation, have a higher risks of not getting designated by the State or revoked by USCIS.

Additionally, every state has its own guidelines and limits on how to do this study and what the process should be. As of May 30th of 2013, the USCIS made clear that it will not question the authority of the state on granting a project TEA designation, except that it deserves the right to confirm the information submitted. In any case considered tracts always need to be contiguous and logical.

Obtaining TEA Designation

While it doesn’t seem to be a standardized process at the federal level to obtain TEA designation, there are a couple of options available. First, let’s remember that if the project is located in a rural area, there is no need to request a letter from any authority regarding TEA designation. The project developer may provide the data along with a letter to the USCIS as the law is very clear and simple in this regard.

In the case in which the TEA is claimed based on unemployment rates, the EB-5 petitioner, or project developer, may request a letter from the local authority in charge of designating the project as in the TEA. Unfortunately the applicant would have to do some research on who provides these designations in their particular state. One state in particular, New Mexico, does not designate projects as TEA, while until recently, states like Nevada were TEA state-wide. Some states have a streamlined process, while a handful of others will analyze the project on an individual basis.

Take Away Points for TEA Designation

✓ Do not overlook the fact that rural areas automatically qualify.✓ TEA designation applies to EB-5 Direct Investments as well as Regional Centers.✓ The TEA designation follows a straight forward definition but the approval process varies a lot from state to state.✓ Unemployment data has to be carefully obtained and reasonableness has to be used when comparing the local unemployment to the national level.✓ Hire an expert to carry out the TEA designation process to mitigate the risks of rejection by the state or the USCIS.✓ If a GATES study is necessary, be reasonable in your assumptions, and seek the advice of an expert.

GREENGATE Consulting, LLC is a privately held company located in Atlanta, GA that services international investors, US immigration attorneys, and US domestic businesses to reach their goals in the most efficient way.